The OECD projects Hungary’s general government deficit could reach 4.1pc of GDP in 2010 in a survey published on Thursday, over the 3.8pc government target.
The OECD projects Hungary’s GDP will fall 1pc in 2010 in its Economic Survey of Hungary, a bigger contraction than the government’s projection for a 0.3pc fall.
In 2011, the OECD sees Hungary’s economy expanding 3.1pc, but stressed that decisive structural reforms are necessary if sustainable economic growth is to start. Hungary needs stricter public procurement regulation and the healthcare system has to be made more efficient, the OECD said. Other recommendations by OECD staff included reducing the size of the public sector, strengthening the role of the State Audit Agency, introducing a list of creditworthy retail borrowers and eliminating entirely the chance for banks to make unilateral changes to contracts.
Hungary’s next government must continue a strict fiscal policy, said Pierre Beynet, a head of one of the groups that makes the OECD country reports. He also warned that local councils could overspend this year in the run-up to municipal elections.
Financial markets are very sensitive and react to every piece of news, Mr Beynet said, citing the examples of Greece and Portugal. For this reason, Hungary’s external risks were assessed to be bigger than the internal risks, he added.
The OECD will publish new macroeconomic projections for Hungary in the spring, Mr Beynet said.